Washington D.C. – At Labor Day 2001, there’s new evidence of a slowdown in an Economic Policy Institute report ( Scattered Showers for Labor Day 2001) showing that inflation-adjusted wages for low- or middle-wage workers in 31 states have fallen since May of 2000. In 10 of those states, wages have fallen for workers in both income groups.

“Workers already struggling during the boom are now entering into even more troublesome economic territory,” says Edith Rasell, the lead author of the Labor Day report. “Shrinking employment and wages may translate into worsening living standards for millions of families across the country.”

The report, by Rasell and Yvon Pho, examines trends in wages, employment, and unemployment in all 50 states and the District of Columbia across three consecutive twelve-month time periods. Period one (ending in May 1999) and period two (ending in May 2000) examine changes during a time of economic growth; the third period, ending in May 2001, includes the onset of the slowdown.

Based on an analysis of newly available wage data, the report shows that, while wages in the middle continue to grow nationally, the rate of that growth has slowed considerably, from 1.4 percent from the first to the second period to just 0.5 percent from the second to the third. In seven states – New Hampshire, Indiana, Michigan, Maryland, Alabama, Nevada, and Hawaii – wages for low- or middle-wage workers fell by at least 2 percent and by as much as 4.4 percent.

On the employment front, the report documents that the job growth of the late 1990s has slowed, with mounting job losses in most states.

Boom-time gains turn to losses in many states

Low-wage workers’ paychecks are shrinking in a number of states. Real wages for the lowest paid workers (those whose earnings put them at the 10th percentile) fell in 22 states during the period ending in May 2001, compared with just 10 states in the previous period.

Wage losses for workers at the bottom of the income scale were most concentrated in the South Central United States (Kentucky, Tennessee, Alabama, Mississippi, Arkansas, Louisiana, Oklahoma, and Texas), where low-wage workers’ pay declined in every state except for Arkansas and Oklahoma between the second and third periods. In three states – Hawaii, Louisiana, and Oregon – wages at the 10th percentile fell in both of the intervals examined in the report.

Losses in these states were, however, contrary to a broader national trend. Nationally, low-wage workers saw an acceleration in their rate of wage growth. From the first period to the second, wages grew by just 0.7 percent for workers at the 10th percentile. But from the second to the third periods, low wages grew by 1.7 percent, indicating that low-wage workers are experiencing widely varying wage trends from one state to the next.

Middle-wage workers are also feeling the effects of the slowdown. Between the latter two periods, median real wages declined in 19 states, nine more than between the previous two period. Four states – Maryland, Montana, Oklahoma, and Washington – experienced declining real wages across the two intervals studied.

Nationally, high-wage workers (those at the 90th percentile) fared the best, with an average wage increase of 2.7 percent in the latter period. This suggests that wage inequality, the gap between those at the bottom and those at the top of the wage distribution, is still growing.

Rising unemployment rates in Midwest, South

The unemployment rate increased in 17 states from the second to the third period. Although increases were heavily concentrated in the Midwest, Washington state, states in the middle-Atlantic region, and states in the South also saw rising rates of joblessness.

Slowing job growth and continued manufacturing declines

Between the latter two periods, total employment nationwide increased by just 1.5 percent, or two million jobs, compared with 2.5 percent and 3.2 million jobs between the two previous 12-month periods.

Employment growth fell by more than half from the second to the third period in nine states: Alabama, Indiana, Iowa, Kentucky, Mississippi, Missouri, North Dakota, Ohio, and South Dakota. Employment growth declined in another 29 states, but by less than half. In Mississippi, employment actually declined.

The slowdown has intensified job losses for manufacturing workers. Manufacturing has been in a long-term decline, shedding 188,000 jobs between the first two periods examined in the report and an additional 211,000 jobs between the latter two periods.

States in every region of the country have seen declines in manufacturing employment across all of the time periods. But in nine states, what had been positive growth reversed itself. In 12 states the rate of decline accelerated

– 30 –

Edith Rasell is an economist at EPI and author of The Prosperity Gap: A Chartbook of American Living Standards. She also directs EPI’s nationwide Economic Analysis and Research Network (EARN). Yvon Pho is a researcher and programmer at EPI and the author of The Firm’s Decision to Train: An Empirical Analysis.

The Economic Policy Institute is a non-partisan, non-profit economic think tank founded in 1986. The Institute is located on the web at www.epinet.org.

Sign up to stay informed

Track EPI on Twitter

EPI is an independent, nonprofit think tank that researches the impact of economic trends and policies on working people in the United States. EPI’s research helps policymakers, opinion leaders, advocates, journalists, and the public understand the bread-and-butter issues affecting ordinary Americans.